The free-market case for a revenue-neutral carbon pricing scheme seems fairly impeccable to me. But instead of organizing its climate change efforts around seeking to ensure that any future carbon pricing plan be as close to revenue neutral as possible, Cato prefers to steadfastly defend the rights of industry to unload air pollution unimpeded.

Taylor ignores Yglesias’ implicit agreement that any carbon pricing should be as revenue-neutral as possible, which further implies support by Yglesias of the notion that the government should avoid using any carbon revenues to subsidize particular technologies;

Taylor refuses to address the question of whether relatively slim, revenue-neutral carbon pricing approaches are much preferable to the heavy-handed, pork-ridden policy alternatives that are being floated before Congress; and

by proffering arguments by Indur Goklany, Taylor in effect concedes that the best policy is for the government to do nothing, other than to encourage adaptation and to fund adaptation efforts in the developing world – thus conceding to industry a continuing “right to emit GHGs”.

It is a puzzle that Taylor doesn’t explicitly address these points, particularly as the policy debate has very much shifted ground from whether the government should act to the question of what policy is preferable. While I believe that Jerry Taylor and Indur Goklany make important points, they can hardly expect to be effectual in their efforts to stand against greater federal policy intervention if they ignore the change in political currents and fail to more directly engage obviously sympathetic observers like Matt Yglesias, to establish and build on common ground, or to more forcefully argue on the basis of principles.

Moreover, Taylor rather surprisingly compounds his disengagement by pulling an apparently skewed figure (the rather low mode rather than the higher mean) from a 2004 review of climate change cost-benefit studies by economist Richard Tol, who has conducted further reviews and analyses and this year has come very strongly out in favor of carbon taxes. In the August 12, 2008 issue of Economics — the Open-Access, Open-Assessment E-Journal, Tol concluded:

… the uncertainty about the social cost of carbon is so large that the tails of the distribution may dominate the conclusions(Weitzman 2007b)—even though many of the high estimates have not been peer reviewed and use unacceptably low discount rates. …

There are three implications. Firstly, greenhouse gas emission reduction today is justified. Even the most conservative assumption lead to positive estimates of the social cost of carbon (cf. Table 1) and the Pigou tax is thus greater than zero. Yohe et al. (2007) argue that there is reason to reduce greenhouse gas emissions further than recommended by cost-benefit analysis.The median of … peer-reviewed estimates with a 3% pure rate of time preference and without equity weights, is $20/tC. …. The case for intensification of climate policy outside the EU can be made with conservative assumptions. … Secondly, the uncertainty is so large that a considerable risk premium is warranted. With the conservative assumptions above, the mean equals $23/tC and the certainty-equivalent $25/tC. More importantly, there is a 1% probability that the social cost of carbon is greater than $78/tC. This number rapidly increases if we use a lower discount rate—as may well be appropriate for a problem with such a long time horizon—and if we allow for the possibility that there is some truth in the scare-mongering of the gray literature. Thirdly, more research is needed into the economic impacts of climate change—to eliminate that part of the uncertainty that is due to lack of study, and to separate the truly scary impacts from the scare-mongering.

Further, while Taylor refers readers to an excellent study by Indur Goklany, he fails to note that Goklany is a strong advocate for “adaptation”, namely, the view that:

The world can best combat climate change and advance well-being, particularly of the world’s most vulnerable populations, by reducing present-day vulnerabilities to climate-sensitive problems that could be exacerbated by climate change rather than through overly aggressive GHG reductions.

But can’t one agree with Goklany’s preferences and yet kill two birds with one stone, by using domestic carbon taxes to fund contributions to global development efforts? The “adaptation is preferable to mitigation” dichotomy simply fails.

Here’s to hoping for more constructive engagement from Jerry Taylor and from Cato.